The Healthy Families Act: Another Burden For Small Employers?

Are we ready for Congress to require that employers provide paid sick days to all employees? Five states (New York, New Jersey, Rhode Island, Hawaii and California) plus Puerto Rico mandate that employers provide short-term disability insurance benefits for employees with non-work-related injuries and illnesses. While employers in other states sometimes voluntarily provide this insurance benefit as well, the Healthy Families Act ("HFA") now pending in both the House of Representatives and the Senate will require something different.

State-mandated short-term disability insurance payments generally a) kick in after an employee has been out at least a week; b) are paid for by employee payroll deductions; and c) only provide employees with a fraction of their compensation. The Healthy Families Act as currently drafted will require that employers with 15 or more employees provide those employees with up to 56 hours of paid sick leave each year—if the employee needs to take the time off and has accrued sufficient hours, the employer will be required to grant the time off and to pay for it.

Currently, no state or federal law requires that employers provide paid sick days that employees can use whenever the employee or a family member is ill. Even the federal Family and Medical Leave Act, which requires large employers to provide employees with job-protected leave in certain situations only requires that the employee’s job be held—not that the leave be paid.

While the possibility of government-required paid sick days is now on the horizon, it is currently uncertain what final form the Healthy Families Act will take. It is likely, however, that the president would sign this bill, should it be presented to him, given the support both President and Michelle Obama have voiced for such an employee benefit in the past.

Businesses, particularly small employers, may shoulder a disproportionate amount of the impact should the Healthy Families Act pass, and should be aware of the potential changes that could be imposed by Healthy Families Act. In its current form, the Healthy Families Act provides that:

Time begins to accrue when employment commences although the employee is not permitted to use the leave until after 60 days of employment.

An employee will be able to accrue paid sick leave at a rate of one hour of paid leave for every 30 hours worked.

Part-time and Temporary employees are currently not excluded from coverage.

An employee may take paid sick leave for their own or close relative’s medical needs or for an absence relating to an incident of domestic violence, sexual assault or stalking in which the employee or close relative was involved.

"Close relative" is broadly defined.

An employee would be able to roll over unused sick leave into the next calendar year.

The bill currently imposes some requirements on employees. For example, an employee who needs this sick leave is required to inform the employer of the expected duration of leave and request the leave seven days in advance when it is foreseeable, and otherwise as soon as practicable. Additionally, an employer may require that the employee provide medical certification when an absence exceeds more than three consecutive workdays.

However, employers would not be required to pay out unused accrued sick time at the end of employment. Most importantly, sick leave policies that meet or exceed the Healthy Families Act’s requirements will not have to provide additional paid sick time. Of course, should the Healthy Families Act pass, employers will need to review their sick pay and Paid Time Off (PTO) policies to ensure that they meet the Healthy Families Act’s standards.

Additionally, there may be a benefit for employers that currently have no sick day policy. If no paid sick day policy is in place, the employer may be prohibited from deducting sick days from the weekly salary of a salaried/exempt employee. In other words, if an employee is classified as being exempt from the overtime pay requirements, and is paid a weekly salary, that employee must receive a full salary for the week if any work is performed in the week, with limited exceptions. If the employee works four days and is sick one day, a full salary must still be paid, if no sick day policy is in place. If this is not done, the employer could risk the employee being classified as non-exempt and entitled to overtime pay. This can become a burden for employers if exempt employees are frequently ill. Should the Healthy Families Act pass, employers who now have this obligation will be able to deduct certain full sick days from the salary of exempt employees because the employer will now will have a sick day policy in place. In that case, sick days may be deducted from the salary of an exempt employee: a) during the first 60 days of employment before an employee is eligible to take a paid sick leave day and b) after the employee’s entitlement to paid sick days is used up. This could be a cost-savings to employers who currently have no sick day policies so must pay for time the employee is not at work.

In further support of the Healthy Families Act, proponents point out that much productivity is lost when sick employees come to work, fearful for their jobs if they take the time off or worried about lost income by staying home, who then spread germs to other employees making them sick as well. They further argue that the provision of paid sick days will encourage employees to stay home when they are ill. Besides frequent hand-washing, one of the best deterrents from spreading germs that cause common illnesses such as colds and sore throats is staying home when you are ill. Thus, Healthy Families Act proponents argue that this law will increase employee productivity and should be passed.

Some states have attempted to pass similar Healthy Families Act statutes, but currently only a few cities (San Francisco and Milwaukee, to name two) have adopted such legislation.

The Healthy Families Act’s passage is not a forgone conclusion, however, since many business associations are concerned about the added cost to employers. They also argue that employers, currently strapped by the overall economic situation, will seek to lessen other benefits if forced to offer paid sick leave days, and is also likely to impose an additional bookkeeping challenge to track paid sick time accrual, entitlement and use, which may be difficult for small employers.

Nevertheless, the Healthy Families Act will likely pass in some form. Thus, employers would be prudent to begin reviewing their existing sick leave policies and consider the impact the Healthy Families Act may have on these policies and their businesses.

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